Economic Impact of the
East Valley Recycled Water Project
Final Report
March 11, 2015
John E. Husing, Ph.D.
Economics & Politics, Inc.
961 Creek View Lane
Redlands, CA 92373
(909) 307-9444 Phone
[email protected]
www.johnhusing.com
Economic Impact of the
East Valley Recycled Water Project
Executive Summary
In 2014, the East Valley Water District (EVWD) proposed the construction of the East Valley
Recycled Water Project. This facility would recycle all wastewater flows captured by the
district. This would be accomplished by treating these flows by a Membrane BioReactor Facility
and using them for groundwater recharge into the Bunker Hill Basin. This report examines the
potential impact on the local economy of this proposal. It indicates that the East Valley Recycled
Water Project would allow the EVWD to accomplish several important economic objectives:
•
Customer Benefits in reduced overall costs and efficiencies of a new plant. The
modeling shows that after the project’s first year, the cost per EVWD’s connection for
reclaimed water treatment plus the development of replenishment water needed to
recharge the Bunker Hill Basin will be less than continuing to use the San Bernardino
Municipal Water Department for wastewater treatment. To calculate the savings over
time:
o The financial payments that must be made to build the East Valley Recycled
Water Project were calculated along with the cost of system upgrades as well as
operations and maintenance.
o Deducted from these costs was the offset from the reclaimed water that the East
Valley Recycled Water Project will produce. This is an important consideration
since this water will be used to recharge the Bunker Hill Basin. Without the
project, the EVWD would need to purchase increasingly expensive State Water
Project water for that purpose and pass that cost on to its customers. With the
project, this cost will be avoided for both the district and its customers.
o The project will thus both save the reclaimed water that the San Bernardino
system currently sends to the Santa Ana River and downstream to the sea and turn
it into a local asset benefiting its customers.
In 2018 when the East Valley Recycled Water Project begins operation, the net cost to
customers based on these calculations would be $24.72 per month per connection, barely
above the $24.70 estimated cost for the San Bernardino Municipal Water Department.
Starting in 2019, the cost per month per connection ($24.58) would be less than for the
San Bernardino system ($25.44) yielding a cost reduction of $0.87 per connection. This
reduction would dramatically increase from there, reaching $29.80 per connection by
2037. This occurs because the increasing production of replenishment water offsets the
ever-more expensive water that would otherwise have to be purchased or traded to
recharge the Bunker Hill Basin. These savings would allow the EVWD to control
wastewater treatment and water costs for its customers as well as allow it to maintain,
improve and modify both systems by deploying the funds that become available due to
reduced costs.
Economic Impact: East Valley Recycled Water Project
Page i
Comparison rates for the San Bernardino Municipal Water Department were based upon
that agency’s stated need for its rates to rise over the next three years (by 2018) to $24.16
plus the $0.54 added for the proportional rate charged to EVWD customers east of
Boulder Avenue. 1 From 2019 on, that rate is estimated to increase 3% a year based upon
the increased costs of electrical and other needs for running a wastewater treatment
facility. The same 3% factor was used for the annual increase of operations and
maintenance cost for the East Valley Recycled Water Project.
•
Ground Water Sustainability. Meanwhile in 2014, California passed new rules
governing underground aquifers that require that water agencies put in place policies to
make them sustainable over the long run. By producing reclaimed water and using it to
recharge the Bunker Hill Basin, the EVWD would not only help its customers but also
help meet its obligations and those of other Bunker Hill Basin producers under this
legislation. It would thus provide a regional benefit.
Project Construction Impact. There would be a substantial construction impact to
building the facilities needed by the EVWD to capture and recycle water into the Bunker
Hill Basin. This would occur as $147.7 million is spent upgrading the wastewater
collection system, plus building and expanding the East Valley Recycled Water Project.
Assuming that 90% of these funds are spent inside of San Bernardino County, with a
concentration in and around the EVWD, the project would represent $131,130,000 in
new funds coming from the national money markets to local contractors and workers.
That “direct” expansion of the economy will set off “indirect and induced” impacts as
these firms and workers re-spend the same dollars with outlets throughout the local area.
NOTE: The full economic impact of a project is analogous to a gold mining town in
the Old West where gold is sent away and money flows into the area to the miners
(direct impact). They in turn spend the same dollars buying food and tools at the
general store and entertainment at the saloon (secondary impacts). The outside dollars
thus have a two stage impact on the local economy as they flow through it.
Using the standard IMPLAN economic impact model for San Bernardino County, the full
direct and secondary impact of the construction effort for the East Valley Recycled Water
Project is calculated to include:
o Job Creation: 1,390. These are jobs created to directly produce the project and
jobs secondarily created as money works its way through other local firms.
o Payroll: $82.4 million. These are funds paid directly to workers to produce the
project and secondarily paid to workers as funds work their way through other
local companies.
1
Presentation to the East Valley Water District, Board of Directors Meeting-Sewer Treatment Rate Study, San
Bernardino Municipal Water Department, January 15, 2014
Economic Impact: East Valley Recycled Water Project
Page ii
o Value Added: $109.3 million. This is the increase in the size of the county’s
economy because the project is built. It only counts new value created by each
operation supporting a project. Thus if cement is mined in the area, that is the
cement company’s contribution to the economy. When that company sells
cement to a concrete firm and it turns it into concrete and sells that to the project,
the value added is not the sales price of the concrete. Rather, it is the difference
between the price of the concrete and the price paid for the cement. Otherwise,
the value of the cement would be counted twice in estimating the actual value
added into the economy.
o Sales: $213.8 million. To local companies, an important consideration is how
much money they will directly receive for building the project. For those
secondarily involved, they want to know how much they will be able to sell to
those contractors or to their workers as money moves through the economy. In
neither case are they worried about their net contribution to value added. The
sales levels are thus not net of the items each firm buys from other local firms.
Importantly, the bulk of this economic impact will occur in the near term when the Inland
Empire still has the third highest unemployment for U.S. areas of over one million
people. Also, it will help a construction sector that has barely begun to recover from the
Great Recession. Construction jobs are a type needed in the EVWD area given that
51.3% of Highland’s adults have a high school or less education and poverty levels are
affecting 20.8% of the city’s population and 30.4% of its children. In San Bernardino,
60.1% are marginally educated with poverty at 34.4% of all people and 46.2% children.
Economic Threat. Important considerations for any construction project in the Santa
Ana River Watershed are the implications of the Delta Smelt and Santa Ana Sucker
judicial decisions plus the terms of SB 901/221 that require water agencies like the
EVWD to certify their ability to provide 20-years of water before granting will-serve
notices to major projects. Given the environmental litigation that often surrounds major
projects, this could potentially impact the two phases of the Greenspot Village Project
(Highland), the Harmony project (Highland), the Highland Hills Development (San
Bernardino) and the potential for four logistics facilities near the former Norton Air
Force Base (Unincorporated). The development of the East Valley Recycled Water
Project would provide the water supplies to minimize the risk of stopping these efforts.
The economic losses that would be avoided by doing so were estimated in a similar
fashion to the construction activity for the project. The results were:
o Construction efforts creating $1.7 billion in property value would be able to go
forward. This would annually generate $18.4 million in property tax revenue to
local governments. Also, the City of Highland would not see $1.88 million per
year in sales taxes from retail projects that could be built.
Economic Impact: East Valley Recycled Water Project
Page iii
o With the construction phases of these projects allowed to occur, the modeling of
the full direct and secondary economic impact on San Bernardino County, largely
focused in and around the EVWD, showed the impact would be:

Job Creation: 15,119

Payroll: $897 million

Value Added: $1,315 million ($1.32 billion)

Sales: $2,528 million ($2.53 billion)
Taken together, these combined impacts indicate that the East Valley Recycled Water Project
would thus have several important economic impacts. It would:
•
Lower the combined cost of water reclamation and water supply to the EVWD’s
customers.
•
Serve as an economic stimulus to the key construction sector at a time when the Inland
Empire’s economy is emerging from the Great Recession.
•
Meet the requirements for groundwater sustainability recently laid down by the State of
California.
•
Ensure that projects involving thousands of jobs and millions of dollars in economic
impact can withstand legal challenges based upon the needed water to serve them.
Economic Impact: East Valley Recycled Water Project
Page iv
Economic Impact of the
East Valley Recycled Water Project
John E. Husing, Ph.D.
In 2014, the East Valley Water District (EVWD) proposed the construction of the East Valley
Recycled Water Project. This facility would recycle all wastewater flows captured by the
district. This would be accomplished by treating these flows by a Membrane BioReactor Facility
and using them for groundwater recharge into the Bunker Hill Basin. This report’s intent is to
examine the potential impacts on the local economy of this proposal.
To accomplish this task, three economic issues appear to arise:
•
Customer Benefits. Currently, there is an economic loss to residents of the EVWD
service area from funds currently paid by the district to the San Bernardino Municipal
Water Department to treat the wastewater collected by EVWD. That water is then sent
down the Santa Ana River to the sea rather than being used to recharge the Bunker Hill
Basin. The impact of the loss of this water is underscored in that it is the EVWD
budgeted $750,000 in a fiscal year for replenishment water for the Bunker Hill Basin. 2
Over time, that annual cost will certainly rise as demands and limitations on water
supplies increase.
•
Construction Economic Impact. When loanable funds or developer fees are used to
build the East Valley Recycled Water Project, there will be a local multi-million dollar
economic impact of this project on the local economy and employment during its
construction phase.
•
Economic Threat. There is a need for water reclamation and recharge due to the threats
to economic activity in the areas served by the Bunker Hill aquifer. These result from
two important court decisions and two pieces of legislation:
o The protections given to the Delta Smelt has reduced the flow of water to all of
Southern California including the area served by EVWD.
o The added protections given by the federal court to the Santa Ana Sucker require
the release of water being stored behind Seven Oaks Dam to aid the fish, instead
of this local source being available to recharge the aquifer.
o State legislation requiring closer regulation of overdrafts in ground water aquifers.
o State legislation requiring any major residential, industrial, commercial or retail
construction project to demonstrate the availability of a 20 year supply of water
by local water agencies.
Together, these actions threaten the long term ability of the area including the East Valley
Water District to see its economy expand. One of the few strategies available to offset
their potential economic impact is using reclaimed water that can help recharge the basin.
2
Comprehensive Water Rate Cost of Service & Rate Study, East Valley Water District, January 28, 2015, page 22
Economic Impact: East Valley Recycled Water Project
Page 1
Customer Benefits
An important consideration for the East Valley Recycled Water Project is the extent that it will
annually reduce costs for the district’s wastewater treatment from the year it starts operation.
That is the conclusion from analyzing the costs and benefits of the project and comparing the net
annual benefit to the $18.50 per connection plus the $2 charge to for connections east of Boulder
Avenue, currently paid by the customers of the EVWD to the San Bernardino Municipal Water
Department for treatment costs.
Below are the steps in the model to look at the costs and benefits are explained. To examine this
issue, the process operates under somewhat different assumptions than those in the East Valley
Water District’s Recycled Water Feasibility Study. It shows the following
Note: Each step conforms to a column in Exhibit 2 below:
1. Fiscal Years. The period used is from 2015-2037. This allows three years for the
reclaimed water project to be built and 20 years of operation.
2. Population. EVWD’s population is shown going from 101,733 in 2015 to 144,987 in
FY 2037, a compound annual growth rate of 1.62%. These data were created as follows:
o A careful analysis of 2010 Census data for the tracts and blocks in the EVWD put the
population at 100,671 that year. From 2010-2014, the area grew by 1.75% in
Highland and 1.33% in San Bernardino areas. This took the EVWD population to an
estimated 101,733 by January 2014, the mid-point of Fiscal Year 2015.
o EVWD has forecasted that the district’s population growth will grow in a range from
30.0% to 46.0% by 2035. This would put build-out at between 132,253 to 148,530
people in 2035. This represented compound annual growth rates of 1.32% and 1.96%
respectively for this period.
o In 2012, Highland had 19 projects on the books that would create 5,118 dwelling
units. Using the city’s 3.47 average density per unit in the city for single family
projects, and 2.62 for apartment projects, yields 17,079 people in these projects.
They would take the district’s population to 118,812. This would leave from 13,441
or 29,718 to come from other projects and/or background growth including the
recently approved Highland Hills project in San Bernardino.
o
If all of that growth is assumed to come from the 2015 base of 101,733 (without the
new projects), it would require compound annual growth rates of 0.62% or 1.29%
from those other sources. This allows the population to reach the 2035 range of
132,253 to 148,530 for EVWD’s two growth scenarios (Exhibit 1).
o
To allow a 20 year operating period from 2018-2037, the forecast was extended to
2037. The growth rate assumed was 1.62%, the average of EVWD’s annual growth
rates of 1.32% the 1.91%. This took the population to 144,987 in 2037 (Exhibit 3,
col. 2). That is towards to the upper end of the EVWD build-out range.
Economic Impact: East Valley Recycled Water Project
Page 2
Exhibit 1.-Population Forecasts, East Valley Water District, 2015-2035
Project
Existing Population
Units
Density6
Population 30%
1
101,733
Forecasted gain2
Build-Out Population
Compound Growth Rate
Population 46%
101,733
30.0%
46.0%
132,253
148,530
1.32%
1.91%
Known Projects in Highland
Hamony3
Greenspot4
17 Other Highland Projects
5
3,632
3.47
12,603
800
2.62
2,096
686
3.47
5,118
2,380
17,079
17,079
118,812
118,812
Population Growth Not Including Current Projects
13,440
29,718
Forecasted Population Base Not Including Projects
115,173
131,451
0.62%
1.29%
Project Totals
Population With Projects
Non-Project Population Base Compound Annual Growth Rates
Sources: 1. 2010 U.S. Census plus 2010-2014 growth from E-5 Reports, CA Department of Finance
2. Recycled Water Feasibility Study, East Valley Water District, page 1
3. Harmony Draft Specific Plan, page 4-3
4. Greenspot Final Specific Plan, page 6
5. Highland Planning Department, Housing Activity Report, 2012
6. Highland density from 2014 E-5 Reports CA Department of Finance
3. Sewer Connections. The number of sewer connections was estimated based upon the
ratio of 19.19% of the population level that existed in FY 2015 (19,527 ÷ 101,733). This
takes connections from the 19,519 in FY 2015 to 31,280 in FY 2037, up 11,761. This
implicitly assumes that residential, commercial and industrial connections will continue
to grow in the same pattern that currently exists.
4. Acre-Feet of Reclaimed Water Production. The acre-feet of reclaimed water
production assumes operations start at 6,270 acre-feet in 2018. That would be 93.3% of
the 6,721 acre-feet per year capacity of the Phase 1 plant (6 million gallons per day
[MGD]).3 It then is assumed to grow at 3.10% compounded to reach the full 11,201
acre-foot capacity of the expanded facility in 2037 after 20-years of operation (10 MGD).
It is recognized that the construction sequence will not strictly follow the same
incremental addition to the facility.
5. Million Gallons Per Day (MGD). Million of gallons per day (MGD) of reclaimed water
is the acre-feet times the 892.75 gallons per day for one acre-foot a year. (#4 x 892.75). It
reaches 10 million in FY 2037.
6. Change in Millions of Gallons Per Day. The change in reclaimed water production,
measured in MGD, starts when the plant is in operation in FY 2018 at 5.60 MGD. From
then on , it is the change in MGD production from one fiscal year to the next.
3
East Valley Water District, An Update of the Recycled Water Feasibility Study, page 12-4, Table 12-6 middle
column
Economic Impact: East Valley Recycled Water Project
Page 3
Costs
7. Plant Operations & maintenance. O&M is estimated at $550,000 per change in MGD
(#6) starting in 2018, 4 up to a flow of 6 MGD. This is based upon the $3.3 million O&M
cost for a 6.0 MGD plant. From 6 MGD to a volume of 10 MGD, it is estimated at
$350,000 per change in MGD. That is based upon a $4.7 million O&M cost for a 10.0
MGD plant. The base cost of $3.08 million in 2018 at 5.6 MGD is annually increased
3% compounded for the increase in electrical and other costs. So also are the $550,000
and $350,000 extra cost figures as MGD increases.
8. System Upgrades. System upgrades totaling $29,200,000 5 are assumed to be made
progressively as the plant comes on line. CA Clean Water State Revolving Fund (SRF)
policies currently allow a repayment period of 30 years 6. The $29,200,000 is therefore
borrowed from the SRF at their current rate (1.5% 7) with repayment spread over 30
years. The payments are thus constant at $1,215,864 annually (Exhibit 3 col. 8). 8
9. Bond Payments. Bond payments are required for the Phase 1 expandable plant financed
at $82,200,000, 9 using a 1.0% interest rate for 30 years, with payments starting when
plant is operational in 2018. The payments are thus constant on an annual payment of
$3,185,095 (Exhibit 3 col. 9). This financing takes advantage of the program by which
the SRF is making available funding for water reclamation projects on these very
favorable terms if they can start operation within three years. 10 The EVWD will be
applying for the funds available under this SRF program.
10. Plant Expansion Cost. The cost of the reclaimed water plant expansion to 10 MGD is
estimated by the EVWD at $41,900,000. 11 It will occur in three equal phases in 2018,
2023 and 2028. However, the cost will be paid by Developer Impact Fees (DIF) and will
not fall on the district’s customers. It is thus shown at zero.
11. Total Cost of O&M, System Upgrades, Plant Construction & Expansion is the sum
of these expenditures for each year (#7 through #10).
4
ibid, Table 12-5: Estimated Annual O& M Costs for the Proposed Recycled Water Project
5
ibid, page 12-5, footnote 1 to Table 12-7
6
State Water Board Offers Extended Term Financing for All Clean Water State Revolving Fund Loans, CA Water
Boards Media Release, January 2014
7
Current Rate 1.5% from CA State Water Resources Control Board
8
9
EVWD intends to apply for these funds but has not yet done so.
ibid, page 12-3, Table 12-4 middle column
10
“State Water Board Approves $800 Million in Financial Incentives for Recycled Water Projects to Provide
Drought Relief,” CA Water Boards Media Release, March 2014
11
East Valley Water District, An Update of the Recycled Water Feasibility Study, page 12-3, Table 12-4 last column
Economic Impact: East Valley Recycled Water Project
Page 4
Exhibit 2.-Modeled Forecast of Net Cost Per Connection of Reclaimed water 2015-2037
1
2
3
4
5
6
7
8
9
10
11
O&M Growth
$550,000 X Chg.
Phase 1:
System
Plant
MGD to 6 MGD
Plant Bond Expansion
Fiscal
Change
Upgrade
Population Connections Acre Feet MGD
$350,000 X Chg.
Payments
Year
in MGD
$29.2m,
Paid By
MGD After 6
$82.2m, 1.0%,
1.5%, 30 yrs.
DIF
30 yrs.
MGD & 3%
Annual Increase
12
Total Cost
13
14
15
16
17
Net Cost
SB Cost comparison
3%
with San
Annual Bernardino
Increase Treatment
Connection
Costs
Net Cost
Replenishment
Total
Net Cost With With Offset
Water Cost
Replenishment
Acre/ft
Replenishment Per Month
Avoided Water
4.00%
Water Offset
Per
Annual Increase
Cost
2015
101,733
19,519
$125.00
$19.04
$0.00
2016
103,385
19,942
$125.00
$21.08
$0.00
2017
105,063
20,374
$200.00**
$23.33
$0.00
2018
106,769
20,815
6,270
5.60
5.60
$3,078,648
$1,215,864
$3,185,095
$0
$7,479,608
$208.00
$1,304,160
$6,175,448
$24.72
$24.70
$0.02
2019
108,502
21,266
6,464
5.77
0.17
$3,269,339
$1,215,864
$3,185,095
$0
$7,670,298
$216.32
$1,398,385
$6,271,913
$24.58
$25.44
($0.87)
2020
110,264
21,727
6,665
5.95
0.18
$3,370,559
$1,215,864
$3,185,095
$0
$7,771,519
$224.97
$1,499,418
$6,272,101
$24.06
$26.21
($2.15)
2021
112,054
22,198
6,872
6.13
0.18
$3,434,688
$1,215,864
$3,185,095
$0
$7,835,647
$233.97
$1,607,751
$6,227,897
$23.38
$26.99
($3.61)
2022
113,873
22,679
7,085
6.32
0.19
$3,539,983
$1,215,864
$3,185,095
$0
$7,940,942
$243.33
$1,723,910
$6,217,032
$22.84
$27.80
($4.96)
2023
115,721
23,170
7,304
6.52
0.20
$3,648,575
$1,215,864
$3,185,095
$0
$8,049,535
$253.06
$1,848,462
$6,201,073
$22.30
$28.64
($6.34)
2024
117,600
23,672
7,531
6.72
0.20
$3,760,574
$1,215,864
$3,185,095
$0
$8,161,534
$263.19
$1,982,013
$6,179,521
$21.75
$29.50
($7.74)
2025
119,509
24,185
7,764
6.93
0.21
$3,876,091
$1,215,864
$3,185,095
$0
$8,277,050
$273.71
$2,125,213
$6,151,837
$21.20
$30.38
($9.18)
2026
121,449
24,709
8,005
7.15
0.21
$3,995,240
$1,215,864
$3,185,095
$0
$8,396,199
$284.66
$2,278,759
$6,117,440
$20.63
$31.29
($10.66)
2027
123,421
25,245
8,253
7.37
0.22
$4,118,141
$1,215,864
$3,185,095
$0
$8,519,100
$296.05
$2,443,398
$6,075,702
$20.06
$32.23
($12.18)
2028
125,425
25,792
8,509
7.60
0.23
$4,244,917
$1,215,864
$3,185,095
$0
$8,645,877
$307.89
$2,619,933
$6,025,944
$19.47
$33.20
($13.73)
2029
127,461
26,351
8,773
7.83
0.24
$4,375,698
$1,215,864
$3,185,095
$0
$8,776,657
$320.21
$2,809,222
$5,967,434
$18.87
$34.19
($15.32)
2030
129,530
26,922
9,045
8.08
0.24
$4,510,614
$1,215,864
$3,185,095
$0
$8,911,573
$333.01
$3,012,188
$5,899,385
$18.26
$35.22
($16.96)
2031
131,633
27,505
9,326
8.33
0.25
$4,649,803
$1,215,864
$3,185,095
$0
$9,050,762
$346.34
$3,229,818
$5,820,945
$17.64
$36.28
($18.64)
2032
133,770
28,101
9,615
8.58
0.26
$4,793,408
$1,215,864
$3,185,095
$0
$9,194,367
$360.19
$3,463,171
$5,731,196
$17.00
$37.37
($20.37)
2033
135,942
28,710
9,913
8.85
0.27
$4,941,576
$1,215,864
$3,185,095
$0
$9,342,535
$374.60
$3,713,384
$5,629,151
$16.34
$38.49
($22.15)
2034
138,149
29,332
10,220
9.12
0.27
$5,094,459
$1,215,864
$3,185,095
$0
$9,495,418
$389.58
$3,981,675
$5,513,743
$15.66
$39.64
($23.98)
2035
140,392
29,967
10,537
9.41
0.28
$5,252,215
$1,215,864
$3,185,095
$0
$9,653,175
$405.16
$4,269,350
$5,383,825
$14.97
$40.83
($25.86)
2036
142,671
30,617
10,864
9.70
0.29
$5,415,010
$1,215,864
$3,185,095
$0
$9,815,969
$421.37
$4,577,809
$5,238,160
$14.26
$42.06
($27.80)
2037
144,987
31,280
11,201
10.00
0.30
$5,583,012
$1,215,864
$3,185,095
$0
$9,983,971
$438.22
$4,908,554
$5,075,417
$13.52
$43.32
($29.80)
141.96
$84,952,549 $24,317,286 $63,701,898
$0 $88,019,184
**San Bernardino Valley Municipal Water District Charges for the energy cost of pumping water. This increase is expected and imminent.
Economic Impact: East Valley Recycled Water Project
Page 5
$54,796,571 $118,175,162
Benefits
12. Reclaimed Water Value Per Acre-Foot. The inflation adjusted value of an acre-foot of
reclaimed water is conservatively estimated to grow from $150 in 2015 to $438 in 2037.
This forecast is made given the statutory, policy and demand pressures on Southern
California’s water supplies. It underlines how wasteful it is to have the EVWD’s
reclaimed water simply lost as it flows from San Bernardino’s treatment facility
downstream to the sea. The calculation of this increasing value is made as follows:
o The EVWD is currently charging $125 an acre-foot for water delivered to it by the
San Bernardino Valley Municipal Water District (Muni). This is the electrical cost
involved in moving water to and within their district. With electrical rates soaring in
California, Muni indicates this cost will rise to $200 in 2017.
o Muni also anticipates the rate will annually increase 4% more than inflation from
2017 forward. This is the case since it takes a significant amount of electrical energy
to move California’s water and the state’s renewable policies have pushed electrical
costs to the point that the state’s November 2014 rates were 49.5% higher than North
Dakota, the second highest state west of the Mississippi River. With Governor
Brown now wanting to raise the renewable share of electrical generation from 30% to
50% over time, that rate will continue to soar and water pricing along with it.
o To estimate the future value of reclaimed water to the EVWD, the starting price is the
$200 per acre-foot in FY 2017. This is increased 4.00% per year beyond inflation to
yield the inflation adjusted value from that point forward.
13. Total Replenishment Water Avoided Cost. Total replenishment water avoided cost is
the acre-feet reclaimed each year times the estimated cost of water that year (#4 x #12).
This is relevant as the EVWD estimates it must find 9,600 acre-feet of potable water to
meet the growing needs of the district as seen in the $750,000 estimate to recharge the
Bunker Hill Basin in just one fiscal year. To the extent that the operation of the East
Valley Recycled Water Project generates reclaimed water each year, it will eliminate the
future need to purchase water to meet this need. EVWD customers will save money as
they will not have to fund the replenishment water. This will be a particularly important
savings to them as replacement water costs increase over time due to higher water
demand in California and/or supplies under increasingly stress as well as soaring
electrical prices.
Net Customer Annual Savings
14. Net Treatment Cost Including Replenishment Water Offset . Net treatment cost is
the total annual cost of the wastewater system upgrades as well as the financing to build
and expand the East Valley Recycled Water Project and operate it (#11) less the offset for
replenishment water produced each year that will not have to be purchased (#13).
Economic Impact: East Valley Recycled Water Project
Page 6
15. Net Cost of Treatment Per Month With Replenishment Offset. Net treatment cost per
month is the cost of building and operating the East Valley Recycled Water Project less
the replenishment water offset (#14) divided by the number of connections (#3) each
year. In 2018, the project starts operation at a monthly cost per connection of $24.72. It
declines from there as the offset from reclaimed water production grows faster than the
costs of operating and financing the project. The net connection cost reaches $13.52 by
2037.
16. Costs Per Connection with Treatment at San Bernardino Plant. The net costs from
the project need to be compared to the costs that would be incurred if the EVWD’s
customers continued having their wastewater treated by the San Bernardino Municipal
Water Department. Its monthly charge in 2015 was $18.50 plus the $0.54 proportion
share of the $2.00 fee charged customers east of Boulder Avenue or $19.04 per customer
on a uniform basis. This increases to $24.70 by 2018 based upon the rate study
undertaken by that department. 12 From there forward, it is assumed that rates from San
Bernardino’s department would rise by 3.0% a year above inflation given the rising price
of electrical and other costs to operate a wastewater facility. It is the same factor applied
to the operations and maintenance costs of the East Valley Recycled Water Project.
17. Net Cost Comparison with Treatment at San Bernardino. Compared to the $24.70 per
connection charge anticipated from the San Bernardino Municipal Water Department in
2018, the EVWD’s customers would pay $24.72 or $0.02 more that year. From there
forward, the monthly cost per connection would be $0.87 less during 2019 and $29.80
less by 2037. The reduction in costs in this analysis is shown on the sewer costs. Since
this reduction is possible by not having the EVWD have to budget to acquire ever-more
expensive replenishment water, the district could choose to use some of these funds to
pay for operations and maintenance, improvement and modifications of its sewer
collection and water systems or rate stabilization for the sewer and water fund.
Reclaimed Water Facilities Construction Impact
There would be an economic gain to San Bernardino County’s economy, largely centered around
the EVWD, that would occur beyond insulating the district’s customers from increased
wastewater treatment and offsetting replenishment water costs. That is the impact of spending
on building the East Valley Recycled Water Project. This occurs because the construction will
be financed by funds flowing into the area from the national money system through either
developer loans, DIF fees or the SRF. It thus represents new money entering the local economy
from the outside world. The money moves from the district to its construction companies (direct
impact) and through them to their local suppliers (indirect impact). All of these firms and their
12
Presentation to the East Valley Water District, Board of Directors Meeting-Sewer Treatment Rate Study, San
Bernardino Municipal Water Department, January 15, 2014
Economic Impact: East Valley Recycled Water Project
Page 7
employees spend at least some of this money in local retail stores and other outlets (induced
impact).
NOTE: The full economic impact is analogous to a gold mining town in the Old West
where gold is sent away and money flows into the area to the miners (direct
impact). They in turn spend the same dollars buying food and tools at the
general store and entertainment at the saloon (indirect and induced impacts).
The outside dollars thus have a two stage impact on the economy as they flow
through the local economy.
To measure these impacts, the starting place is the amount of money being raised for the
construction activity. It is then necessary to assume how much of it is spent with local firms and
workers. That yields the direct impact by sector. Given that information, the indirect and
induced impacts (secondary impacts) are then estimated using the IMPLAN model based upon
U.S. Bureau of Economic Analysis data for the relevant market. 13 In the case of the East Valley
Recycled Water Project, the impact would come from the spending of funds to build the various
facilities discussed in conjunction with Exhibit 2. That would include:
•
•
•
•
•
•
System upgrades
Phase 1 Expandable Plant (construction only)
Phase 2 Expansions
Total Construction
Local Share
Direct Impact
$29,200,000
$76,600,000
$41,900,000
$147,700,000
90%
$131,130,000
Through build-out of the East Valley Recycled Water Project, the expenditure of $147.7 million
to build the project would inject $131.1 million into the local economy from the outside world.
The 90% factor is used because nearly all of the firms and workers doing the work would come
from operations located inside the county’s economy. The direct and secondary impact of this
injection of funds into the county’s economy, a large part in the EVWD, would be (Exhibit 3): 14
Exhibit 3.-Economic Impact, Reclaimed water Facility Construction
Impact
Direct
Indirect & Induced
Total Impact
•
Jobs
Payroll
Value Added
$60,677,215
Sales
809
$53,337,047
$131,130,000
582
$29,018,064
$48,611,164
$82,677,161
1,390
$82,355,111
$109,288,379
$213,807,161
Job Creation: 1,390. These are jobs created to directly produce the project and jobs
secondarily created as money works its way through other companies in the economy.
13
IMPLAN Professional Model 3.1.1001.12 copyrighted 2013
14
Modeling is specially related to San Bernardino County and thus yielded somewhat lower economic impacts than
shown in the East Valley Water District, An Update to the Recycled Water Feasibility Study, February 2015, page
12-4
Economic Impact: East Valley Recycled Water Project
Page 8
•
Payroll:
$ 82.4 million. These are funds paid directly to workers to produce the
project and secondarily paid to workers as the same monies work their way through other
local companies in the economy.
•
Value Added: $109.3 million. This is the increase in the size of the county’s economy
because the project is built. It only counts new value created by each operation
supporting a project. Thus, if cement is mined in the area, that is the cement company’s
contribution to the economy. When that company sells cement to a concrete firm and it
turns it into concrete and sells it to the project, the value added is not the sales price of the
concrete. Rather, it is the difference between the price of the concrete and the price paid
for the cement. Otherwise the value of the cement would be counted twice in estimating
the actual value added into the economy.
•
Sales:
$213.8 million. To firms in an economy, an important consideration is
how much they receive for directly building the project. For those secondarily involved,
they want to know how much they will be able to sell to those contractors or to their
workers. In neither case are they worried about the issue of their net contribution to
value added. The sales levels are thus not net of the items each firm buys from other
local firms.
Importantly, the bulk of this economic impact would be occurring between 2015 and 2018 when
the Inland Empire is still suffering economically. While its 7.2% unemployment rate is down, it
is still the third highest of any U.S. area of one million or more people (Exhibit 4). The
construction of the East Valley Recycled Water Project would help with this issue.
More specifically, the project would help the Inland Empire’s construction sector which is just
starting to move out of the doldrums (Exhibit 5). From 2007 to 2011, it went from 127,483 jobs
to 59,080, a decrease of -68,433 positions or -23.7%. It has come back a little in 2012-2014,
adding back 13,013 jobs. However, the sector’s employment is still off net of -55,420. This is
work that needs to be created in the region and the EVWD since construction is a major
Economic Impact: East Valley Recycled Water Project
Page 9
employer of marginally educated workers. For instance in Highland, 51.3% of residents 25 and
over had a high school or less education in 2013. It was 60.1% in the city of San Bernardino.
By creating construction and other jobs, projects like the East Valley Recycled Water Project can
also help with the levels of poverty being experienced in the EVWD. Specially, the 2013
American Community Survey by the Census Bureau found that:
•
Highland: 20.8% of all people and 30.4% of all children were living in poverty in 2013
•
San Bernardino: 34.4% of all people and 46.2% of all children were living in poverty
The project would thus represent a part of an economic recovery strategy for San Bernardino
County and the EVWD’s service area.
Economic Threat
Meanwhile, residents and businesses in Southern California and the EVWD’s service area face
difficulties from two major environmental court decisions and two important pieces of
environmental legislation.
Delta Smelt. The first is from the protections given to the Delta Smelt in the San Joaquin Valley
that were upheld last month by the U.S. Supreme Court. According to the Natural Resources
Defense Counsel:
“WASHINGTON (January 12, 2015) – The Supreme Court today let stand a federal plan
to protect California’s vital Delta ecosystem. The Court refused to hear an appeal brought
by agribusinesses trying to undermine protections for the Delta Smelt under the
Endangered Species Act.
Economic Impact: East Valley Recycled Water Project
Page 10
Specifically, the businesses were trying to overturn a federal appeals court decision that
had upheld the protections– which limit pumping during certain times of the year to
protect this imperiled native fish. The protections are crucial to help maintain the health
of California’s Bay-Delta estuary and the thousands of fishing and farming jobs that
depend on its health.” 15
One result of these protections has been to reduce the water allocations to the regional water
agencies in wet and dry years since 2000 in all but one year (2004). Since 2003, the available
water has varied from a low of 5% (2014) to a high of 80% (2009, 2011). Increasingly, this
appears to be a permanent condition (Exhibit 6). For Southern California, this means continued
difficulties in supplying water to companies, industry and dwellings.
Santa Ana Sucker. More recently, the Inland Empire has found that even its locally generated
water is under threat from an endangered species, in this case the Santa Ana Sucker. To lessen
the region’s dependence on the State Water Project, local leaders supported investment in the
Seven Oaks Dam which can capture up to 200,000 acre feet of water flowing out of the local San
Bernardino and San Gabriel mountains and use it for groundwater recharge and water banking.
However, a recent court ruling on expanding the habitat for the fish includes the dry land
northeast of the I-10 and I-215 interchange up to and including the Seven Oaks Dam. It would
require water releases to maintain flows through this area and downstream to support it. 16 Thus:
“Water managers in the Inland Empire have said the habitat designation could cause the
loss of up to 125,800 acre-feet of local water supplies each year, an amount that
15
http://www.nrdc.org/media/2015/150112.asp
16
Oct. 23 decision of U.S. District Court Judge James V. Selna
Economic Impact: East Valley Recycled Water Project
Page 11
represents about one-third of the water currently used by 1 million residents of Riverside
and San Bernardino counties.” 17
“… the critical habitat designation threatens our rights to water behind the dam and could
spell the end of our Seven Oaks Dam Stormwater Management Project.” 18
CA Water Legislation. With a significant share of State Water Project flows restricted by the
Delta Smelt ruling and the pending impact on local water flows of the Santa Ana Sucker
decision, the Inland Empire now faces water supply difficulties with enormous potential
consequences for the economy. This is the case because of the potential impact on development
of two pieces of California legislation:
•
SB 901 (Costa, 1995) requires urban water suppliers (3,000+ customers) to prepare an
Urban Water Management Plan which includes a description of conservation
investments. This applies to project for which an application has been submitted to a city
or county: 19
(a) A proposed residential development of more than 500 dwelling units.
(b) A proposed shopping center or business establishment employing more than 1,000
persons or having more than 500,000 square feet of floor space.
(c) A proposed commercial office building employing more than 1,000 persons or
having more than 250,000 square feet of floor space.
(d) A proposed hotel or motel, or both, having more than 500 rooms.
(e) A proposed industrial, manufacturing, or processing plant, or industrial park
planned to house more than 1,000 persons, occupying more than 40 acres or land, or
having more than 650,000 square feet of floor area.
(f) A mixed-use project that would demand an amount of water equivalent to, or
greater than, the amount of water required by a 500-dwelling-unit project.
•
SB 610 (Costa, 2001) & SB 221 (Keuhl, 2001) tightened the requirements of SB 901 by
indicating that local water agency must determine that there is a 20-year supply of
sufficient water to support the developments detailed in the Costa bill. It specifically
states that: 20
17
“Santa Ana Sucker Fish Habitat Expansion Upheld by Federal Court,” Submitted by Matt Williams on Tuesday,
10/23/2012. Association of California Water Agencies, http://www.acwa.com/news/endangered-and-invasivespecies/santa-ana-sucker-fish%E2%80%99s-expanded-habitat-upheld-federal-court
18
John Rossi, General Manager Western Municipal Water District Testimony on “Questionable Fish Science and
Environmental Lawsuits: Job and Water Supplies at Risk in The Inland Empire,” House Natural Resources
Subcommittee on Water and Power, October 18, 2011
19
CA Legislative Counsel's Digest, SB 901, Costa. Water Supply Planning, February 23, 1995
20
CA Legislative Counsel's Digest, SB 221, Kuehl. Land use: water supplies, February 14, 2001
Economic Impact: East Valley Recycled Water Project
Page 12
(2) "Sufficient water supply" means the total water supplies available during normal,
single-dry, and multiple-dry years within a 20-year projection that will meet the
projected demand associated with the proposed subdivision, in addition to existing
and planned future uses, including, but not limited to, agricultural and industrial
uses. [italics added for emphasis]
While this requirement has not been implemented to a large degree as yet, it has served to stop a
major Newhall Ranch development in Ventura County. 21 Locally, it led to the 2007 temporary
suspension of large projects in the Perris area of Riverside County. In that case the legislation
was cited when for “some projects within the Eastern Municipal Water District Service Area, …
will-serve letters were not issued pending an improvement in the water supply outlook in light of
the drought and Delta pumping restrictions.” 22 [underlining added]
Given this background, a major rationale for the EVWD proposing the East Valley Recycled
Water Project is to help protect the economy of the area dependent upon the Santa Ana River
Watershed including that within the district. Looking specifically at the district in 2015, there
are 5,795.5 acres of developable land that fall in categories potentially subjected to 20-year water
supply requirements (Exhibit 7). Three types of projects in particular standout:
Exhibit 7.-Vacant Developable Space, East Valley Water District, 2015
Proposed Land Use
Vacant
May Be Converted
Future Total
Existing
Total
Industrial
121.1
48.3
169.4
58.7
228.1
Multi-Family Residential
335.2
276.9
612.1
265.7
877.8
Office
146.0
149.7
295.7
3.6
299.3
Retail
239.6
133.0
372.6
159.0
531.6
Single Family
4,953.6
387.2
5,340.8
4,122.0
9,462.8
Total Developable Acres
5,795.5
995.1
6,790.6
4,609.0
11,399.6
Square Feet Per Acre
43,560
43,560
43,560
43,560
43,560
252,451,980
43,346,556
295,798,536
200,768,040
496,566,576
Total Potential Square Feet
Source: Doug Mende, Geographic Information Systems
•
Greenspot Village. This project will occupy 104-acres of the Golden Triangle
Community Policy Area of the City of Highland. It would include:
o 595,600 square feet of commercial/retail space in the Highland Marketplace
o 174,000 square feet of commercial retail space in the Village Center
o 769,600 square feet total.
21
“Judge Blocks Plan to Build 22,000 Homes in L.A. County,” by Todd S. Purdum, New York Times, June 3, 2000
22
“Perris-Based Water District First To Postpone Delivery Deals to Major New Developments,” Jennifer Bowles &
Dan Lee, Riverside Press Enterprise, Dec. 11, 2007.
Economic Impact: East Valley Recycled Water Project
Page 13
o In addition, some 800 dwelling units are planned in the project area 23.
Under SB 901/221 rules, it appears that both the retail and residential portions of this
project will require will-serve letters certifying that 20 years of water would be available
to it.
•
Harmony. This proposed project sits on 1,673 acres that constitute the eastern side of
the City of Highland. The project would contain 658 acres of residential development
ranging from very low to high density units. Also, there would be associated
neighborhood commercial sites.
Altogether, the proposed Harmony Specific Plan calls for 3,467 to 3,632 residential
units to be built. 24 Under SB 901/221 rules, it would also require will-serve letters
certifying that 20 years of water will be available to it.
23
Specific Plan, Greenspot Village Marketplace, June 2013, page 23
Economic Impact: East Valley Recycled Water Project
Page 14
• Highland Hills. In February 2015, the San Bernardino Planning Commission approved
the 695 home Highland Hills development that lies within the EVWD’s service area. 25
Under SB 901/221 rules, will-serve letters certifying 20 years of water will be required.
•
Industrial. While there is not a lot of vacant industrial land within the EVWD, most of it
lies just north of Third Street and the former Norton Air Force Base in unincorporated
San Bernardino County. There appears to be contiguous land in that area sufficient for
four major industrial buildings in the 700,000 square foot range common for this use in
that area. They would consume 5,600,000 square feet or property, including 50%
setbacks or 104.6 acres. As they would be above the 650,000 square foot threshold for
SB 901/221, it would again appear that any development of such facilities would require
will-serve letters certifying that 20 years of water will be available to it.
Potential Economic Impact. With the Delta Smelt and Santa Ana Sucker court decisions
reducing availability of CA State Water Project water as well as that being captured by Seven
Oaks Dam, the ability of local water agencies like EVWD to certify the availability of 20 years
of water to new projects in the Santa Ana Watershed is threatened. That combined with the
provisions of SB 901/221 mean that without other strategies, the groups seeking to use
environmental policies to stop growth in places like the Inland Empire will have succeeded.
To put these results into context, it is possible to estimate the economic impact of the loss of
Greenspot Village, Harmony, Highland Hills and the four potential industrial facilities:
•
Greenspot Village. Using a $250 estimated value for completed regional center
construction based upon estimates by major local construction firms, the value of 595,600
square feet of space would be $148.9 million. A 174,000 square foot central commercial
center would be worth another $43.5 million. Together, this 769,600 square feet in
facilities would be valued at $192.4 million in 2014 dollars.
Based upon projects under construction elsewhere in the East Valley region, high quality
apartment projects are currently valued at $245 a square foot. Using that figure, 800
units in a variety of standard sizes averaging 723 square feet would represent 578,476
square feet of livable space and have a value of $141.7 million in 2014 dollars.
If Greenspot Village could not be built, the lost value of structures created in the
EVWD’s service area economy would be $334.1 million.
In addition, there would be 595,600 square feet of retail space in the Highland
Marketplace. That would include a 150,000 square foot Target store. If that retailer
matches its expected store average in 2015, it will generate $306 in sales per square foot
24
25
Harmony Draft Specific Plan, August 2014, page 4-2
San Bernardino County Planning Commission action Tentative Tract Map 15731 on 695 homes, February 18,
2015
Economic Impact: East Valley Recycled Water Project
Page 15
or $45.9 million a year. 26 Meanwhile, U.S. non-tenant in-line retailers averaged $355 per
square foot in 2012 (Exhibit 8). 27 Using that figure and assuming 10% vacancy or
401,040 square feet of occupied space, the center would see another $142.4 million a
year in retail sales for a total of $188.3 million a year.
Exhibit 8.-Tenant Mix Analysis, In-Line Non-Anchor Occupied Space, 2012
If a project like Greenspot Village could not be built because of the combination of court
imposed water reductions to the region as well as state law, the cost to the local economy
would be $334.1 million in lost property value creation plus $188.3 million a year in
2014 prices of lost retail activity. This does not include any retail sales off of the 174,000
square feet of commercial space in the Village Center.
Exhibit 9.-Current Status, East Highland Residential Market, Jun-Dec 2014
Metric
East Highlands
Average Home Price
Highland
California
$339,222
$216,385
$346,694
Average Home Price/sq. ft.
$133
$136
$193
% New Listings
17%
17%
13%
% Reduced Listings
40%
34%
29%
% Foreclosed Listings
N/A
N/A
2%
% of All Homes For Sale
1%
1%
1%
% of All Homes Sold (last 6 months)
2%
2%
2%
$348,530
$265,065
$550,476
$153
$147
$299
Average Sale Price
Average Sale Price/sq. ft.
Source: Realtor.Com
•
26
27
Harmony. The Draft Specific Plan calls for 3,417 non-apartment dwellings including
single family residential units, townhomes, clustered enclave homes and a few duplexes.
In the East Highland area, homes sold for an average of $348,530 in the last six months
of 2014 (Exhibit 9). As these are almost all existing homes, they do not necessarily have
the wide variety of amenities planned for Harmony based upon similar Lewis Operating
Company projects in Chino, Fontana and Rancho Cucamonga. It would thus appear to be
“What’s Driving Target’s U.S. Revenue Per Square Foot?” Trefis for Professional Investors, January 3, 2014
Retail Sales Set Rent Levels by Raymond T. Cirz, CRE, Retail Issues, Vol. 37, November 1, 2012
Economic Impact: East Valley Recycled Water Project
Page 16
a modest price assumption to use $350,000. The value would thus be $1,195,950,000 at
built-out, in 2014 pricing terms.
There would also be 215 apartment units assuming that neighborhood retail is not built.
If this follows the pattern of recent high end apartment units built in the Inland Empire,
they would average 723 square feet for a total of 155,445 square feet. At $245 per square
foot, they would be worth $38,084,025 in 2014 dollars when completed.
If a 3,632 dwelling project like Harmony could not be built because of the combination of
court imposed water reductions to the region as well as state law, the cost to the local
economy would be a total of $1.234 billion in lost property value creation.
• Highland Hills. The EVWD services the portion of the city of San Bernardino where the
recently approved Highland Hills project is planned. Given the hillside location of the
project, the $350,000 new home price appears appropriate. The value of 695 homes
would thus total $243,250,000. That valuation would be lost if 20 years of water could
not be certified by the district for the development.
•
4 Industrial Facilities. As indicated, if four 700,000 square foot logistics facilities to
handle warehousing operations or ecommerce were built just north of the former Norton
Air Force Base where this type of activity is concentrated, they would consume
5,600,000 square feet of land area or 104.6 acres. Based upon facilities of this type
located in the Redlands donut hole, the assessed valuation per square foot of such
facilities averages $59.23 per square foot of 2,800,000 developed square feet. If projects
like these four warehouses could not be built because of the combination of court
imposed water reductions to the region as well as state law, the cost to the local economy
would be $165.9 million in lost property value creation.
• Total Property Value Loss. Adding these estimates, the potential threat in constant
2014 dollars of the lack of water resources available to the EVWD, due to legal and
Economic Impact: East Valley Recycled Water Project
Page 17
legislative actions, could cost the economy of the district’s service area +$1.977 billion
in lost property value (Exhibit 10). At the $1.14609 average property tax rate per $100 of
assessed valuation in San Bernardino County, local governments and transportation
agencies would ultimately lose $22.6 million in annual property tax revenue. In
addition, the $188.3 million a year in lost retail sales activity in Highland would mean
that 1.0% of that amount would be the lost retail sales taxes to the city or $1.88 million a
year.
Exhibit 10.-Summary of Potential Economic Impacts
Environmental Decisions & SB 901/221
Impact Type
$192,400,000
Greenspot Apartments (Highland)
$141,708,000
Harmony (Highland)
$1,234,034,025
Highland Hills (San Bernardino)
$243,250,000
Warehouses (Unincorporated)
$165,853,263
Total
•
Estimate
Greenspot Village Commercial Centers (Highland)
$1,977,245,288
Construction Activity Loses. If the properties outlined above and summarized in
Exhibit 11 are not built, there would also be a loss of construction activity to create them.
This also represents an economic loss to San Bernardino County with the loss
concentrated in and around the EVWD. This is because the construction will be financed
by funds flowing into the EVWD from the national banking system. It thus represents
new money entering the local economy from the outside world. It moves from
construction companies (direct impact) and through them to their suppliers (indirect
impact). All of these firms and their employees may spend at local retail stores and other
outlets (induced impact).
To measure these impacts, the starting place is the amount of money being raised for the
construction activity. It is then necessary to assume how much of it is spent with various
sectors and what percent of each of those is likely to be spent with local firms and
workers. That yields the direct impact by sector. Given that information, the indirect and
induced impacts (secondary impacts) is estimated using the IMPLAN model based upon
U.S. Bureau of Economic Analysis data for the county. 28 Looking at each phase of
construction:
o Greenspot Village. This represents 595,600 square feet for a regional commercial
center at $125.35 per square foot or $74.7 million plus 174,000 square feet for a
community commercial center at $138.50 per square foot or $24.1 million. The total
spent would be $98.8 million. It is assumed however that only 90% of this money
would go to local suppliers and workers in the county. This reduces the direct impact
28
IMPLAN Professional Model 3.1.1001.12 copyrighted 2013
Economic Impact: East Valley Recycled Water Project
Page 18
to $88.9 million.
(Exhibit 11):
The direct and secondary economic impact results would be

Job Creation: 960. These are jobs created to directly produce the project
and jobs secondarily created as money works its way through other local
firms.

Payroll: $57.0 million. These are funds paid directly paid to workers to
produce the project and secondarily paid to workers as funds work their way
through other local companies.

Value Added: $75.1 million. This is the increase in the size of the economy
because the project is built. As explained earlier, it only counts new value
created by each operation supporting a project.

Sales: $143.6 million. To firms in an economy, this is the level of business
each would obtain.
Exhibit 11.-Economic Impact, Greenspot Village Construction
Impact
Jobs
Payroll
Value Added
Sales
Direct
579
$38,117,025
$42,997,550
$88,881,574
Indirect & Induced
381
$18,899,967
$32,064,517
$54,711,745
Total Impact
960
$57,016,992
$75,062,068
$143,593,319
o Greenspot Apartments. Based upon this analyst’s experience with higher-end
apartment projects, it is assumed that the 800 apartments will average 723 square feet
a piece for 578,400 total square footage. The soft costs for engineering, architecture,
legal and other such work is estimated at $10.2 million with 92.8% or $9.5 million
going to local professionals. Construction costs are estimated at $36.2 million with
100% going to local workers and subcontractors. Financing costs are estimated at
$2.6 million with 15% or $0.4 going to local financing firms. The total direct
injection of funds would thus be $46.0 million. The direct and secondary economic
impact results would be (Exhibit 12):

Job Creation: 482

Payroll: $27.3 million

Value Added: $39.1 million

Sales: $75.0 million
Exhibit 12.-Economic Impact, Greenspot Apartment Construction
Impact
Jobs
Payroll
Value Added
Sales
Direct
261
$16,850,259
$21,409,700
$46,033,954
Indirect & Induced
221
$10,469,811
$17,610,074
$28,967,857
Total Impact
482
$27,320,070
$39,019,773
$75,001,811
Economic Impact: East Valley Recycled Water Project
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o Harmony. Based upon this analyst’s experience with higher-end master planned
projects, a 3,632 residential unit master planned community is roughly estimated to
have the following costs and injection of funds into San Bernardino County’s
economy:

Residential construction costs of $509.8 million with 90% to local workers
and contractors or $458.8 million.

As it starts with raw land, backbone infrastructure costs are estimated at
$102.3 million with 90% or $92.1 million to local firms.

In-tract infrastructure is estimated at $48.8 million with 90% or $43.9 million
from local operations.

An elementary school is estimated at $8.4 million with 90% or $7.6 million
from local contractors and workers.

At 6% of $1.23 billion in real estate sales, broker commissions are calculated
at $74.0 million with 100% going to local agents.

Contractor and sub-contractor profits are the difference between the $1.234
billion in sales and $743.4 in total costs (assuming conservatively that the
developer pays the real estate commissions) or $490.6 million. Of this 75%
or $368.0 million is estimated to go to local firms.
This puts the direct local injection of funds into the EVWD’s service area economy at
$1,044 million ($1.04 billion). The direct and secondary economic impact results
would be (Exhibit 13):

Job Creation: 9,967

Payroll: $590 million

Value Added: $887 million

Sales: $1,698 million ($1.70 billion)
Exhibit 13.-Economic Impact, Harmony Construction & Sale
Impact
Jobs
Payroll
Value Added
$491,832,753
Sales
Direct
5,172
$361,405,158
$1,044,443,535
Indirect & Induced
4,795
$228,754,776
$391,958,046
$653,731,071
Total Impact
9,967
$590,159,934
$883,790,799
$1,698,174,606
Harmony will be built over a much longer period than the Greenspot complex.
These impacts will thus be dependent on the levels of production and sales in any
given time frame.
o Highland Hills. Based upon discussions with residential developers, 695 homes at
an average size of 2,250 square feet would represent 1,563,750 square feet of
building:
Economic Impact: East Valley Recycled Water Project
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 At the conservative rate of $75 per square foot including soft costs,
backbone infrastructure and lot preparation, that would represent $117.3
million in construction. If 90% goes to local firms in San Bernardino
County, that would amount to $105.6 million.
 Profit on the construction activity would be the difference between the
sales price and the costs or $137.7 million. If 75% went to local
contractors and sub-contractors, that would put $103.3 million into the
economy.
 At 6% commissions on sales of $243,250,000, the local real estate
community would earn $14.6 million.
This puts the direct local injection of funds into the East Valley’s economy from
Highland Hills at $223.4 million. The direct and secondary economic impact results
would be (Exhibit 14):

Job Creation: 2,107

Payroll: $127 million

Value Added: $191 million

Sales: $365 million
Exhibit 14.-Economic Impact, Highland Hills Construction & Sale
Impact
Jobs
Payroll
Direct
1,064
Indirect & Induced
1,042
Total Impact
2,107
$77,759,057
Value Added
Sales
$106,236,703
$223,420,781
$49,375,360
$85,042,327
$141,560,981
$127,134,417
$191,279,030
$364,981,762
Highland Hills will also be built over a moderately long period. These impacts
will thus be dependent on the levels of production and sales in any given time
frame.
o 4-Logistics Facilities. Based upon this analyst’s experience with large logistics
facilities, a 700,000 warehouse is roughly estimated to cost $60 per square foot. Four
such facilities would cost $168 million to design and build. Assuming 90% or $151.2
million of this represented funds injected into the East Valley economy, the direct and
secondary economic impact results would be (Exhibit 15):

Job Creation: 1,603

Payroll: $95 million

Value Added: $126 million

Sales: $247 million
Economic Impact: East Valley Recycled Water Project
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Exhibit 15.-Economic Impact, Logistics Facilities
Impact
Jobs
Payroll
Value Added
Sales
Direct
932
$61,500,508
$69,964,119
Indirect & Induced
671
$33,459,401
$56,051,308
$95,331,249
1,603
$94,959,909
$126,015,427
$246,531,249
Total Impact
$151,200,000
• Potential Role: East Valley Recycled Water Project. In Fiscal Year 2014-2015, the
EVWD estimates that it will deliver 21,730 acre feet of water to its customers. At its
inception the East Valley Recycled Water Project would capture and recharge 6,270 acre
feet of water into the Bunker Hill Basin or 28.9% of the current need. At build-out, the
facility would capture and recharge 11,201 acre feet or 51.5% of the current need. In
either case, the facility would allow the EVWD to certify its ability to supply 20-years of
water to major projects within the district. It would thus be a key strategy in ensuring
that the economic impacts of major projects within the district are not lost to
environmental lawsuits and legislation. Through build-out for the projects discussed
above, this includes (Exhibit 16):

Job Creation: 15,119

Payroll: $897 million

Value Added: $1,315 million ($1.32 billion)

Sales: $2,528 million ($2.53 billion)
Exhibit 16.-Economic Impact, All Facilities
Impact
Direct
Indirect & Induced
Total Impact
Jobs
Payroll
Value Added
$732,440,824
Sales
8,007
$555,632,006
$1,553,979,844
7,110
$340,959,316
$582,726,272
$974,302,904
15,119
$896,591,322
$1,315,167,096
$2,528,282,748
These are likely conservative estimates that do not include several other possible impacts:
o The local retail spending of the new population that would move into the EVWD
to inhabit the Harmony and Greenspot Village projects.
o The huge potential retail sales that could occur if one of the four warehouses were
to become a fulfillment center, a use becoming increasingly common in the inland
region. 29
o The retail sales in the commercial space at the Greenspot project’s Village Center
or any retail component of Harmony.
29
A study by this analyst of a 1,000,000 square foot e-commerce facility, using average sales per square foot for
such operations, was estimated to generate to $3.3 million in local retail sales taxes.
Economic Impact: East Valley Recycled Water Project
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Sustainable Supply
In light of the recent drought, “Governor Edmund G. Brown Jr. on September 16, 2014 signed
historic legislation to ensure a sustainable supply of California groundwater [SB 1168 (Pavley)
SB 1319 (Pavley), AB 1739 (Dickinson) that together makeup the Sustainable Groundwater
Management Act] ... The new law mandates the creation of local groundwater management
agencies that will monitor extraction and create sustainability plans that must be in place in 20
years. DWR [Department of Water Resources] is given expanded responsibilities under the law,
including requirements to revise groundwater basin boundaries and create guidelines for local
agencies to write their Sustainable Groundwater Management Plans:” 30 The time table for local
agencies to comply is as follows:
•
By 2017, local groundwater management agencies must be identified.
•
By 2020, over draft groundwater basins must have sustainability plans.
•
By 2022, other high and medium priority basins not currently in overdraft must have
sustainability plans.
•
By 2040, all high and medium priority groundwater basins must achieve sustainability.
As discussed earlier, the EVWD currently sends wastewater from the district’s customers to the
San Bernardino Municipal Water Department for treatment at its facility. The resulting water is
then sent down the Santa Ana River to the sea rather than being used to recharge the Bunker Hill
Basin. The creation of the East Valley Recycled Water Project would allow the EVWD to treat
its own wastewater and use it to recharge the underground basin. As it would allow the district
to meet 28.9% to 51.5% of its current water delivery needs by capturing and recharging the
Bunker Hill Basin, the project would be an important element in allowing the district to comply
with responsibilities under this act.
Grand Total Impact
Altogether, the East Valley Recycled Water Project would allow the EVWD to accomplish
several important economic objectives:
•
30
The modeling shows that after the first year of operation, the EVWD’s net cost of
wastewater treatment per connection will be less than if the San Bernardino Municipal
Water Department continued to supply this service. This includes the offset for
replacement water to recharge the Bunker Hill Basin. It also includes the financial
payments made to build the new facilities. The reduction in cost will increase
dramatically as production of reclaimed water increases with population growth. It will
give the EVWD the opportunity to utilize the funds that become available with reduced
costs to keep customer wastewater and water costs down as well as fund needed
maintenance, improvements and modifications of both the sewer and water systems
Governor Brown Signs Historic Groundwater Legislation, http://gov.ca.gov/news.php?id=18701
Economic Impact: East Valley Recycled Water Project
Page 23
•
The cleaned reclaimed water lost to the sea would instead be used to recharge into the
Bunker Hill Basin with an asset whose value will increase as California’s supply is
restrained, its demand increases and the electrical costs of moving it grow.
•
There would be a substantial construction impact to building the facilities needed by the
EVWD to capture and recycle water into the Bunker Hill Basin. These include nearly
1,400 jobs, over $82 million in payroll, almost a $110 million impact on economic
activity and just under $214 million in new business for San Bernardino County’s firms.
Importantly, most of this impact would occur at a time when the local economy is still
struggling with high employment and poverty levels.
•
Given the pressure that court decisions and state policies are having on California’s water
supplies, there exists the threat that districts like the EVWD will no longer be able to
certify the availability of 20 year water supplies to projects under SB 901 and SB 221.
Were that to occur, the potential losses from major projects like the Greenspot Village
project, Harmony and the four logistics facilities would be nearly 14,500 lost jobs, over
$850 million in lost payroll, the loss of $1.25 billion in economic activity and $2.42
billion in business sales.
•
In addition, if these projects could not be built, $1.7 billion in property valuation would
not be created nor would there be the annual generation of $18.4 million in property tax
revenue to local governments. Also, the City of Highland would not see $1.88 million
per year in sales taxes from retail projects that could not be built.
•
The reclaimed water facility will assist in making the Bunker Hill Basin sustainable over
time, providing regional benefits and satisfying a long term requirement of California’s
newest water management legislation.
Economic Impact: East Valley Recycled Water Project
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